ENERGY SERVICES HUNTINGTON, W.Va., Aug. 11, 2017 /PRNewswire/ -- Energy Services of America (the "Company" or "Energy Services") (OTC QB: ESOA), parent company of C.J. Hughes Construction Company and Nitro Electric Company, announced the filing of the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2017. Energy Services earned revenues of $35.7 million and $98.6 million for the three and nine months ended June 30, 2017, respectively. Gross loss was $1.4 million for the three months ended June 30, 2017, while gross profit was $4.8 million for the nine months ended June 30, 2017. Net loss available to common shareholders was $1.9 million and $1.2 million for the three and nine months ended June 30, 2017, respectively. The Company had a negative adjusted EBITDA of $2.2 million (($0.15) per share) for the three months ended June 30, 2017 and an adjusted EBITDA of $1.3 million ($0.09 per share) for the nine months ended June 30, 2017. The backlog at June 30, 2017 was $68.2 million.
Below is a comparison of the Company's operating results for the three and nine months ended June 30, 2017 and 2016:
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
2017 2016 2017 2016
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Revenue $35,686,215 $43,370,975 $98,554,692 $105,750,087
Cost of revenues 37,124,756 39,391,420 93,796,294 96,436,182
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Gross profit (loss) (1,438,541) 3,979,555 4,758,398 9,313,905
Selling and administrative expenses 1,600,454 1,588,076 5,735,342 5,646,252
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Income (loss) from operations (3,038,995) 2,391,479 (976,944) 3,667,653
Other income (expense)
Other nonoperating income (expense) 5,112 (48,358) (106,548) (72,420)
Interest expense (183,583) (204,491) (558,098) (636,412)
Gain on sale of equipment 26,431 24,136 95,262 137,657
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(152,040) (228,713) (569,384) (571,175)
Income (loss) from continuing operations before
income taxes (3,191,035) 2,162,766 (1,546,328) 3,096,478
Income tax expense (benefit) (1,323,887) 1,085,541 (605,298) 1,530,632
Income (loss) from continuing operations (1,867,148) 1,077,225 (941,030) 1,565,846
Dividends on preferred stock 77,250 77,250 231,750 231,750
Income (loss) from continuing operations
available to common shareholders (1,944,398) 999,975 (1,172,780) 1,334,096
Income from discontinued operations
net of tax expense - - - -
Net income (loss) available to common shareholders $(1,944,398) $999,975 $(1,172,780) $1,334,096
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Weighted average shares outstanding-basic 14,239,836 14,239,836 14,239,836 14,239,836
Weighted average shares-diluted 14,239,836 17,673,169 14,239,836 17,673,169
Earnings (loss) per share from continuing
operations
available to common shareholders $(0.137) $0.070 $(0.082) $0.094
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Earnings (loss) per share from continuing
operations-diluted
available to common shareholders $(0.137) $0.057 $(0.082) $0.075
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Earnings (loss) per share
available to common shareholders $(0.137) $0.070 $(0.082) $0.094
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Earnings (loss) per share-diluted
available to common shareholders $(0.137) $0.057 $(0.082) $0.075
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The Company has two pipeline projects ("Project A" and "Project B"), both started in April 2017, that have recognized an estimated $5.8 million combined loss at June 30, 2017. The Company believes the total amount of expected loss has been recorded at June 30, 2017. Project A had an estimated contract value of $9.5 million to install 19,000 feet of 24" pipe, 3,400 feet of 16" pipe, and 600 feet of 8" pipe. At June 30, 2017, the Company had recognized a $3.3 million loss on this project. Project B had an estimated contract value of $4.5 million to install 14,600 feet of 16" steel pipe. At June 30, 2017, the Company had recognized a $2.5 million loss on this project. Losses on both projects are primarily due to daily production significantly below historical results. The inefficient production was due to a shortage of qualified labor during an extremely busy time in the pipeline industry and more inclement weather than was estimated for the projects. This led to greater labor expense and longer project schedules than was estimated on the projects. These projects will be substantially complete during the fourth quarter of fiscal year 2017 with final cleanup scheduled for February 2018.
A summary of the projects for the three months ended June 30, 2017 is below:
Earned Cost of Gross
Revenue Revenues Loss
Project A $1,986,986 $5,246,336 $(3,259,350)
Project B 1,788,448 4,257,789 (2,469,341)
Total $3,775,434 $9,504,125 $(5,728,691)
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Douglas Reynolds, President, commented on the announcement. "Obviously, this was a rough quarter for the Company. We have projects that are performing well, but these two pipeline projects had a huge negative effect on the quarter ended June 30, 2017 financial report. The Company is committed to completing these projects in the most efficient manner possible while maintaining our emphasis on working safely." Reynolds further explained, "There is a large amount of work going on in the natural gas industry. While that would seem to be a good thing for our Company, it created a situation where it has been difficult to attract and retain the skilled personnel necessary to meet our production expectations. These projects were bid consistent with other projects we completed in the same general areas in previous years, however; the current labor market conditions will require us to adjust our production expectations in bidding future projects."
Please refer to the table below that reconciles adjusted EBITDA and adjusted EBITDA per share:
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Net income (loss) available to
common shareholders $(1,944,398) $999,975 $(1,172,780) $1,334,096
Add: Income tax expense (benefit) (1,323,887) 1,085,541 (605,298) 1,530,632
Add: Dividends on preferred stock 77,250 77,250 231,750 231,750
Add: Interest expense 183,583 204,491 558,098 636,412
Less: Non-operating expense (income) (31,543) 24,222 11,286 (65,237)
Add: Depreciation expense 880,467 637,884 2,286,618 1,863,496
Adjusted EBITDA $(2,158,528) $3,029,363 $1,309,674 $5,531,149
Common shares outstanding 14,239,836 14,239,836 14,239,836 14,239,836
Adjusted EBITDA per common share $(0.15) $0.21 $0.09 $0.39
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Certain statements contained in the release, including without limitation statements including the words "believes," "anticipates," "intends," "expects" or words of similar import, constitute "forward-looking statements" within the meaning of section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements of the Company expressed or implied by such forward-looking statements. Such factors include, among others, general economic and business conditions, changes in business strategy or development plans and other factors referenced in this release. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
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SOURCE Energy Services of America
